Playtika Holding Corp. Q1 2023 Earnings Call
Welcome to the play ticker Q1 2023 earnings call at this time, all participants aren't listen only mode.
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[noise] I would like to hand, the conference over to our speaker today, Hey, Lee S. B P of corporate finance and Investor Relations. Please go ahead.
Welcome everyone and thank you for joining us today for the first quarter of 2023 earnings call complete Pic of holding court.
Me on the call today, a rubber ethical co founder and CEO critique and Craig Abrams thinks he can press.
Evidence in Chief Financial Officer.
I'd like to remind you that today's discussion may contain forward looking statements, including but not limited to the company's anticipated future revenue and operating performance.
These statements another comment not a guarantee of future performance, but rather are subject to risks uncertainties some of which are beyond our control.
Forward looking statements apply them today.
Should not rely on them as representing our views in the future.
Take no obligation to update these statements. After this call for a more complete discussion of the risks and uncertainties police you're filing with the SEC.
We have posted on the company's flight deck for Investor Relations website, and we will also post are prepared remarks immediately following the call with that I will now turn the call over to Robert.
Good morning, and thank you everyone for joining that will go into the building a little memento from last quarter. We ship the grandchildren grew up across both casual and social casino title.
I'm proud of our incredible global talent for I believe she's married and for setting the pace for the rest of the year.
We are on track to meet our financial guidance bought by that.
Quarter recall, and we are excited about our content drugged up this.
This view.
Overall, we generated revenues of $656.2 million and created adjusted EBITDA of 20.
$22.7 billion.
Several months ago, we took meaningful step to further foreclosed on I will call shred of life operation.
Our leadership position in mobile gaming with you based on our best in class like game operation services, which enable us to provide innovate and personalised content to other players.
Obviously my point in the game journeys.
Physical water, we took positives right, it's almost further developing and implementing our technology and that will get us through a deal.
Apparently technology platform combined with evergreen nature of our titles.
[noise] allowed us successfully drive engagement.
Yeah. After you.
I will definitely go capabilities allow us to deliver an improvement.
More personalised experience double loyal community of players and I truly believe there is a lot of mold growth potential across all our games to.
To summarize I'm confident with strep I'm a position within industry this year and they too will outperform our peers if their mobile gaming sector.
I will now turn it over to Craig.
Thank you Robert we are pleased with our performance to start the air.
We saw continued positive revenue trends that we started to see in queue for across all of our games.
Our top nine games grew revenue per day sequentially quarter over quarter.
In addition, we're starting to see the flow through from our focus on efficiency and changes that we've made that how we allocate capital.
For the quarter, we generated $656.2 million of revenue up 4% sequentially and down 3.1% year over year Q4 last year Marcus stabilization point for our portfolio and we are encouraged by their organic sequential growth, we experienced to start the year, particularly the strength within our cash.
All games.
We made the strategic decision to shift more of our user acquisitions spend our casual growth titles.
Our focus on higher margin growth as evidenced in our financials this quarter generating strong credit adjusted EBITDA <unk>.
Credit adjusted EBITDA was $222.7 million up 9.9% sequentially and 12.8% year over year.
Our credit adjusted EBITDA margin was 33.9% compared to 32.1% in Q4, 22, and 29.2% in Q1 22.
Net income was $84.1 million down, 3.9% sequentially and up 1.1% year over year.
We generated $151.5 million of revenue from our direct to consumer platform up 0.9% sequentially and down 6% year over year.
Direct to consumer platform is comprised of all of our social casino themed titles in Bengal Blacks are only casual title on the platform.
As a result direct to consumer platform revenues were slightly down year over year, given the decline in our social casino themed titles offset by strength and bingo black.
Looking ahead, we're excited to introduce solitaire Grand harvest Andrea's journey to the platform starting in the second half of 2023.
Turning out of our business results for the quarter revenue across our casualty in games grew 7.1% sequentially two for 1% year over year.
This growth was driven by strength in Bengal Blitz, Solitaire Grand Harvest and Jones journey.
Casual games now represent 56.3% of total revenue.
Bingo bless revenue was $159.2 million up to 6% sequentially and 13% year over year.
We are extremely proud of our <unk> team for another quarter of record revenue.
Being able to the game that we acquired over a decade ago and is still on our fastest growing titles.
And the quarter, we saw strong results from contact packs and promotional features surrounding the superbowl Valentine's day, and Saint Patrick's day celebrations.
We also introduced many games and rolled out the new pets feature which has received positive feedback from our players.
We experience tangible benefits from digital studios AI capabilities in Bengal Blacks.
We are now able to identify new segments of top players much earlier in their player journey and as a result, we're able to provide these players with personalized content, which led to an uplift in revenue for the studio.
The success of this program is encouraged us to roll out these capabilities traditional studios this year.
Solitaire Grand Harvest revenue was $85.5 million up 17.4% sequentially and 29% year over year. We are encouraged by this level of growth, it's such a large scale studio.
On our last call we spoke about the strong momentum that we're seeing in solitaire. This past quarter, we introduced changes into the game, giving our players expanded gamemode selection, which increased prior engagement. In addition, we increase the number of levels by over three times driving retention and improving satisfaction amongst our <unk>.
Players.
Finally, we introduced our biggest matter feature to date with the new farm that is helping increase prior engagement.
<unk> is a game that required of our four years ago and the continued success of this franchise that testament to our proven capability to drive meaningful organic revenue growth.
Shifting to our social cause you know damn games.
Especially because European games revenue was that 0.3% sequentially and down 11% year over year.
A year over year decline was driven primarily by lowers results in slot ammonia.
Slaughter Mania revenue was $146 $6 million down, 1.7% sequentially and 12.1% year over year.
From Q3, 2022, Q4, 2022, <unk> revenue per day declined by 0.6%.
From Q4, 2022, Q1 2023 revenue per day increased by 4%. We are encouraged to see slotted mania revenue stabilize for the second consecutive quarter and we're pleased to see the positive trends in average daily paying users in a studio.
Turning now to specific line items in our P&L for the first quarter cost of revenue decreased 0.6% year over year and operating expenses decreased 13.9% year over year.
R&D decreased by 9.1% year over year.
The lower R&D expenses were largely driven by the reduction in force that we announced at the end of the fourth quarter.
Sales and marketing decreased by 20% year over year.
Like last quarter savings in sales and marketing expenses were driven by the timing of some of our offline campaigns and the reduction of user acquisition expenses and reader car and new games.
In addition, we had savings driven by the reduction in force.
G&A expenses decreased by 6.7% year over year is.
This was largely due to an increase focused on cost reduction across the organization that we began to implement in the first half of 2022.
As of March 31, we had approximately $767 $2 million in cash and cash equivalents.
Looking at our operational metrics average GPU increased 4.2% sequentially and 0.9% year over year to 326000.
Average da you increased three 4% sequentially and decreased 9.9% year over year to $9.1 million.
Art, Dow increased to 6% sequentially and 8.1% year over year 280.
Finally, we are reaffirming our full year guidance to deliver full year revenue in the range of $2.57 billion to $2.62 billion in credit adjusted EBITDA in the range of $805 million to $830 million.
We continued expect capital expenditures between $115 million to $120 million with that said, we'd be happy to take your questions.
Alright.
Thank you and at this time, we we conduct the Q&A session. As a reminder to ask a question you would need to press star one one or your telephone and wait for your name to be announced.
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We stand by while we compiled the Q&A roster.
Our first question comes from Stephen Jew.
From Credit Suisse. Please go ahead.
Alright. Thank you so Robert and Craig So can you update us on your a stance toward new game development, right now and how that might be evolving.
Also talk about your ongoing M&A efforts it seems like it's all going difficult environment, particularly for the smaller studios.
So are you seeing an increased number of assets come up for sale. Thank you.
So thank.
Thank you for for the <unk>.
He got to the president under the mayonnaise, we see we see to them more opportunities coming to the market.
Is there we said the last few.
The market is going to be tough for new players for small players and the company that will have a issue with.
Like understanding with the operation will find was <unk>, depending on the marketing effort and if you depend on marketing effort, it's really hard to Roy business. So we as a company that leaving it they'll prorate shows the gaming industry. This is a big advantage for us to help small come.
Believe to grow their business. So yes, so we see more opportunities in the market, we see Molly company as a approaching us and.
We think that the additional is going to be available to view regarding the new games as we said last few we've decided to focus.
This thing.
Investing in the game that we are promising less dependent in terms of developing a new games. We believe this is the right approach to accompany let's play ticker until now we see rarely go the result in this direction.
Thank you.
Alright, one moment for our next question.
Our next question comes from Matt calls from Morgan Stanley . Please go ahead.
Everybody thinks taking the questions I have to the first is just you know on the stabilization that you're seeing with <unk> and I guess you know.
16 O portfolio more broadly can you just give a little more detail about what's driving that and any sort of your view on on how sustainable that the acceleration is from here and the second question is just about about January today I you know what I was wondering if you could talk a little bit about some of the opportunities that you have to drive efficiencies using using those tools, but also are there.
Any risks for your business you would highlight that those tools proliferate. Thank you.
So thanks for the questions regarding this little menu, we said.
Okay, two quarters ago that the we have a delegate.
Doug destabilize the a photo mania.
Actually we did very well in the last two quarters, especially in this quarter I think a different.
We are focusing at the coal games, while focusing of the things that really.
Posted to the players we are bringing more paying users to the to go to the opera a pages are in place.
It's working very well for us we are very optimistic about the future.
I think it will keep saying.
And Luckily for domain. This also cause you know it feels games is stabilized and.
Even optimistic.
<unk>.
What was the second question.
I think it's around the janitor, Nevada.
So.
[laughter] as you know we are investing in AI already few years, we always believed.
Today, everyone is speaking about AI become like impossible, but <unk> believes in this and I will first and.
The rest of it was around May of 2017 2018.
We are happy to announce that.
I can say this quarter, we see very well the results, especially the <unk>. We saw the growth of bingo bleeds refill. It happening was began but it's Craig said that the call. We lose this game may require these gave me 10 years ago and with the help of AI, we see a very promising growth and by the way we're going to take.
This learning and this experience do I will give it.
Here's the thing.
I'm going I'm, the same guy is not going to replace it.
The employer that is going to help them to grow their business with less mistakes with some more promising fee and the full as the way I look okay and efficiency are we looking of growth right. Now is there all around there would you give those studios.
Great. Thank you.
Alright, thank you.
One moment for our next question.
Our next question comes from Douglas Kreutz.
From Cowan any company. Please go ahead.
Hey, Thanks, if I just take your Q1 results in annualize him a touch above the top of an ear guidance range on revenue in pretty significantly above it on EBITDA I understand it's early in the year, but is there anything that you've seen in kinda early choose to that suggest to you that you're you run radio cheating she wanted slowing down and.
Or are you guys looking at any sort of increase in your cost basis ear goes on thank you.
Hey, Thanks for the question. So in terms of our guidance you know, we just gave guidance just a couple of months ago as part of their reporting for the fourth quarter and obviously, we executed very well in terms of sequential growth.
One of our top titles all growing sequentially per day, and I feel very good about where we are but it is still early in the year and so I think given the you know the macro environment felt those best to keep guidance there on top one I think in terms of.
Costs and expenses were looking at opportunities to ramp marketing throughout the year as well as.
You know some expenses are getting deferred to later in the year. So I don't I don't think you can just look at run rating Q1, So we decided.
Guidance at this point.
Okay. Thank you.
Alright. Thank you one moment for our next question.
Our next question comes from Aaron Lee from <unk>. Please go ahead.
Hi, Thanks for taking my question incorrect congratulations on the results.
I just wanted to.
There is a nice pick up in a D. A using especially the Gpus would you you called out.
Can you talk about how trends looked as you move through the quarter from January to March in how things have looked in early two Q.
Sure. So we don't.
Discuss kind of auto quarter results I wouldn't say that we performed well throughout the quarter in terms of Q1, we have been focused as we talked about them. Prior calls on D. P. O D. P. O is the best metric for us in terms of monitoring the health of our user base and you know Q1 typically has higher marketing spend.
And so you will see some on top of the funnel growing as a result, but we continue to focus on <unk> and conversion and driving that <unk> number going forward.
Gotcha.
And just in terms of macro in the house that the consumer can.
Can you talk about what sort of macro impact you might be seeing on your players and how that's changed in recent months. Obviously the first quarter results were very nice does it seem like you're still funny.
That improved a bit thank you.
I think what we've seen since it's kind of the middle of the fourth quarter of last year is that the the environment has been.
Doing well and we see kind of a healthy environment for mobile gaming and obviously, it's represented in our results and so given.
We have not last year, we had nine titles in the top 100, I think we have a very good sense of you know the the health of the overall mobile gaming system in fields pretty good right now.
Okay, great. Thank you very much.
All right. Thank you.
One moment for our next question.
Our next question comes from Eric holder from Rock M. K M. Please go ahead.
Thank you and good morning, Craig just sort of looking at your expense.
Expenses.
R&D has come way down as you've taken some cost side of the equation.
I assume that's all people cost as you look at how your staff to cross your studios.
Corporate is that 102 million sort of a a relatively stable number you see going forward or will that increases. The ear progresses, you know what can you <unk> tell us about that.
I think from I guess, what I would comment is from a head count perspective, we feel like.
Things should be pretty consistent where we are we have as they made a difficult decision last year to make some changes we focus on efficiency.
But now we're seeing more efficient.
Organization and one that.
They were to make quick decisions and move quickly and so we feel good about the direction, we're headed and feel the.
The expense structure is a good place.
Okay, and just as a quick follow up.
And looking at your Capex was quite low in the first quarter could you maybe talk about how.
That ramps as we progress of the year, you know to get to your 115 120 million outlook.
Sure. So you just timing when purchases are made so we still expect to be in the range of guidance.
But nothing specific from quarter to quarter that we're going to provide.
Okay. Thank you.
You got it.
Thank you one moment for our next question.
Our next question comes from Colin Sebastian from Beaird. Please go ahead.
Hi, Good morning. This is reason for calling.
Thanks for taking our questions I was just curious if.
You guys can provide an update on the localization strategy and then another question is how are you guys thinking about the future.
The mobile landscape potentially as Google makes changes next year.
Yeah, it'd be great to hear that thanks.
So I'll I'll take localization and then near our CMO well, we'll talk about the broader landscape in terms of.
Mobile mobile advertising.
In terms of localization, we continue to see opportunities to law.
Localise our games in different markets, we just had two successful campaigns.
The bingo blades in Europe , and we're looking at some other opportunities as well.
And some other jurisdictions. So I think we you know we keep seeing that leveraging our 360 approach with television combined with performance.
Is working well as we're launching these new new markets and changes in.
And a local CRM as well as local language is making a difference. So we will continue to push on that opportunity as well.
Hey, guys Mill College athletic as CMO, So regarding I I would say that privacy around Android. So I think that the we learn a lot from obviously from the idea of failure, we have a very close relationship with Google and it started just about in the office. So I assume that the most of the things that we have learned we can implement in the new.
Area, and we are working with them step by step will be ready to wherever they wouldn't come.
Thanks.
Alright, thank you.
One moment for our next question.
Our next question comes from Eric's Sheridan from Goldman Sachs. Please go ahead.
Thanks, so much for taking the questions maybe if I could get to in first you know and you talked about AI broadly in the investment you've made over a number of years can you talk a little bit about how 'bout might factor into longterm content in game creation, Cos and how to think about the potential to drive efficiencies.